Click to Enlarge Participation in the surge to new highs by the S&P 500 last week was narrow, with fewer than 8% of the constituent stocks also moving to new highs. That’s a sign of weakness and a lack of conviction in the move. More than 300 were more than 3% away from a new high last Thursday before Friday’s wipeout.
When the S&P 500 hit a record back in May 2013, it did so with nearly 40% of its components participating. Over the last 10 years, such a narrow rise to new highs happened 10 other times. Only two managed to hold onto additional gains over the days, weeks and months that followed (September 2006 and January 2013).
The chart above shows how the percentage of S&P 500 stocks in uptrends has been mired in a pattern of lower highs and lower lows all year.